S&P lowers Republic Bank, Citizens Bank

S&P said it lowered the long-term issuer credit ratings on Republic Bank Ltd. and First Citizens Bank Ltd. to BBB from BBB+.

The agency also said it affirmed the short-term ratings on both banks at A-2.

The outlook is stable.

S&P said it revised the Bicra score on the island nation to group 6 from 5, which anchors banks operating in the country at BB+.

The downgrades reflect the sluggish real credit growth, declining house prices and economic contraction of the past three years, which have increased economic imbalances in a system that could spike credit losses, the agency explained.

The nation's recession has put a lid on the banking system's credit expansion, S&P said.

The recession was caused by low oil and gas prices in global markets, disruptions in domestic production and ongoing U.S. dollar shortages in the banking system, the agency said.

If economic conditions are unchanged, credit growth would remain subdued and house prices will continue to trend downward, S&P said.

Under such a scenario, Trinidadian banks' credit losses might climb, denting profitability and capitalization metrics given that about 35% of the loan exposures are to mortgages, the agency said.

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